rmd / death benefit

Submitted by bill chamberlin on Wed, 2014-08-27 15:03

Case: 75 y.o wife is deceased’s sole beneficiary of his IRA. 75 y.o. husband died in June after fulfilling 1/2 of his 2014 RMD. His IRA gets rollover into her’s. She executes a distribution equalling remaining amount of his 2014 RMD. Custodian won’t mark distribution as a “Death Benefit”. Can anyone confirm if the best course of action is to have CPA file a “Nominee Form” with the IRS stating that the distribution was his money? Was a mistake made in not moving his IRA to a Beneficiary IRA in her name? If so, how would said mistake be remedied?



Submitted by tomd37 on Wed, 2014-08-27 16:33

I don’t see any need to mark the remaining amount of his RMD with a death benefit code.  It is taxable income in all respects and she will be filing a joint tax return for 2014 anyway.  Assuming she is over 70.5 and has tax-deferred accounts, she must take her own RMD which will also be taxable income on the joint 2014 federal return. Am I missing something here?  Tom D.



Submitted by bill chamberlin on Wed, 2014-08-27 19:08

She is 75 y.o.  She is taking her own RMD.  My concern is properly enabling the IRS to identify the fulfillment of HIS 2014 RMD which was only partially completed at the time of death, and not finding out until too late (2015) that it was done incorrectly. 



Submitted by tomd37 on Wed, 2014-08-27 19:33

Has anyone talked with the custodian issuing the 1099R and asked them how the two RMD payments are going to be documented at year-end? I believe that the custodian will issue the decedant’s remaining RMD prior to transferring the IRA to her name as I believe that is normal policy when the owner passes without having fulfilled the RMD for the year.  Will they then issue one 1099R in the decedant’s name reflecting the total RMD for 2014?  Will they also issue one 1099R in the survivor’s name reflecting her own total RMD for 2014? As mentioned earlier I don’t see how the coding in box 7 (4 or 7) will come into play.  It is my understanding both total distributions are taxable for federal tax purposes and the survivor will be submitting a married filing jointly return for 2014.Maybe others more knowledgable will respond to this post.  Tom D.



Submitted by Alan - IRA critic on Wed, 2014-08-27 20:09

  1. The completion of the decedent’s RMD is more transparent if the RMD is taken from the inherited IRA prior to the rollover because there will be a different 1099R reporting it than the surviving spouse’s own 1099R. However, the survivor can still provide documentation showing the distribution of decedent’s RMD in the unlikely event the IRS inquires about it. As Tom indicated, the Box 7 coding does not matter because the decedent’s RMD can be satisfied whether it is taken from the inherited IRA or from the surviving spouse’s own IRA.
  2. If the decedent had a different basis % in his IRA than the surviving spouse, the taxable amount of the decedent’s remaining RMD will differ depending on when it was taken, but the gross amount will be the same.
  3. Technically, if the surviving spouse rolls the inherited IRA over to her own by taking a reportable distribution, the amount of the remaining RMD cannot be part of the rollover without creating an excess contribution to her own IRA. That would have to be corrected in the usual manner, but I have never heard of the IRS requesting it be handled in that manner. They appear to be content as long as the decedent’s RMD is actually completed from either an inherited or in the case of a spouse, their own IRA.


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